Fall always seems to sneak up on us, doesn’t it? Before we know it, the end of the year will be upon us. So now may be the perfect time to plan how you can make the most of your charitable gifts this year. And the time to plan for a significant gift couldn’t be better. The Lincoln Community Foundation has just announced a new match opportunity that creates an incentive to support your favorite charitable causes and help local nonprofits build sustainable support.
Beginning this fall, the Lincoln Community Foundation will provide a 10 percent match for new gifts to funds that support Lincoln nonprofit organizations and houses of worship. Endowed funds established at the Lincoln Community Foundation that receive new gifts of $10,000 or more are eligible for the match. This match opportunity will run through December 2018 or until all funds have been disbursed, but a fund created this fall will provide a tax deduction for the current year.
Of course, there are many ways to make a meaningful year-end charitable gift. A gift of appreciated stock or mutual fund shares provides an enhanced tax benefit when compared to a gift of cash. The donor receives an income tax charitable deduction for the full value of the donated shares and pays no long-term capital gains tax on the appreciation.
For example, Elena purchased stock for $3,000 10 years ago that is now valued at $10,000. If she sells the stock, she will incur a capital gains tax of $1,050 ($7,000 appreciation times 15 percent capital gains tax rate). Instead, Elena chooses to use the stock to make a charitable gift. In her 28 percent tax bracket, she enjoys a deduction of $2,800 for the full fair market value of the stock ($10,000). She also avoids the $1,050 capital gains tax liability she would have paid if she sold the stock. Therefore, the net cost of her gift is only $6,150 ($10,000 – $2,800 – $1,050) compared to $7,200 for a cash gift of $10,000.
There’s another giving technique that’s gaining traction lately for folks of a certain vintage. An IRA charitable rollover allows a donor age 70½ or older to make a tax-free transfer from an IRA directly to a qualified charity. The amount transferred is not eligible for a charitable income tax deduction, but it counts toward the donor’s annual required minimum distribution (RMD). This is an especially attractive option for donors who must take IRA withdrawals they do not need.
Donors can use these tax-wise giving methods to benefit the charitable organizations that reflect their interests and passions. Your financial adviser or the Lincoln Community Foundation can help you make these creative gifts. Please let us know if we can be a resource as you reflect on how best to make an end-of-year gift that is meaningful to you and your family. I can be reached at (402) 474-2345, or firstname.lastname@example.org.